Southwest Airlines announced on Thursday that it will cut 2,000 jobs and shut down operations at four airports after warning about increased costs and slower revenue growth due to fewer new aircraft deliveries from Boeing.
Boeing Delays Causing Southwest's Revenue Decline
The Dallas-based airline revealed that it will only receive 20 aircraft from Boeing this year, down from the previously estimated 46 in March. This is after facing challenges about a safety incident in January involving a mid-air cabin panel blowout on an Alaska Air flight. Despite regulators imposing production limits on the 737 MAX, Boeing is not meeting even those reduced levels, as reported by Reuters earlier this month.
Southwest CEO Bob Jordan expressed concern about the recent updates from Boeing regarding additional delays in aircraft deliveries, noting the significant challenges these delays pose for both 2024 and 2025 in the company's first-quarter financial results statement.
Southwest intends to discontinue flights to Syracuse, New York; Cozumel, Mexico; Bellingham, Washington.; and George Bush Intercontinental Airport in Houston. The airline, which primarily operates at the smaller Hobby Airport in Houston, also announced plans to end the year with 2,000 fewer employees compared to the beginning of the year as part of a broader effort to counter recent losses, aiming to offset its financial setbacks, which will see the airline scaling back its voluntary time-off programs.
Southwest Airlines Cost-Cutting Measures
Southwest, known for its all-Boeing fleet, anticipates a 4% year-on-year increase in total seat capacity for 2024, down from the earlier estimate of 6% growth. The airline stated that schedule reductions will lead to slower revenue growth compared to last year and result in higher-than-expected operating costs.
To minimize the effects of these changes, Southwest is focusing on boosting productivity and managing discretionary expenses. In addition to discontinuing service at the four airports, the airline plans to reduce capacity in markets such as Chicago and Atlanta.
Southwest reported an adjusted loss of 36 cents per share in the first quarter, slightly higher than the average analyst expectation of a 34-cent loss, as per LSEG data.
What Southwest Airline Is Known For
Southwest, the pioneer of low-cost, no-frills air travel, is recognized for its single economy class cabin and absence of seating assignments. While many other airlines have introduced fees for services like checked baggage, seat reservations, and economy plus upgrades, Southwest has maintained its one-size-fits-all approach, except for charging extra for early boarding. CEO Jordan mentioned to CNBC, that following the company's disappointing earnings report,, they are exploring new initiatives, such as arranging seating and boarding their aircraft. Southwest does not also charge passengers for their first two checked bags.
Craig Jenks, head of New York-based consulting firm Airline/Aircraft Projects Inc., remarked to The Post that just a few months ago, Southwest would have brushed off the notion of charging extra for additional services, noting that the concept of offering perks like more legroom for those willing to pay contradicts the principles that Southwest has historically upheld.
Southwest has also decreased the proportion of transcontinental flights, those lasting over five hours, to 1.3% of its total seats, down from 4.4% in 2017. The airline's average flight duration is two hours and 10 minutes, considerably shorter than JetBlue's three hours and 20 minutes and Alaska Airlines' three hours and 40 minutes, as highlighted by Jenks. Southwest struggles to draw affluent, higher-paying passengers because it lacks the amenities and options other airlines offer to attract this demographic.
